Insurers react to 'world's slowest' tag

CECILE MEIER

Last updated 11:56 21/02/2014

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Insurance companies in the Christchurch market have been rated among the world's slowest to respond to a major disaster.

Global insurance broker and risk management company Marsh published a report this week looking at how the insurance industry performed in the aftermath of three of the most expensive insured earthquakes in history.

Between February 2010 and March 2011, major earthquakes struck Chile, Japan and New Zealand, resulting in an estimated total insured loss of about US$60 billion (NZ$72b).

Marsh analysed the commercial claims from its clients in the three countries for the report.

In Christchurch, Marsh dealt with 2500 commercial claims, 19 per cent of an estimated total of 13,000 commercial claims after the February 2011 earthquake.

The total value of its clients' claims was about $2.1b, 31 per cent of an estimated total value of commercial claims of $6.8b.

Marsh's clients included the hospital, the university, manufacturers, retail stores and property owners in the CBD.

Most claims filed by Marsh clients in Chile were settled within 12 months and the majority within 18 months in Japan.

Progress was much slower in New Zealand, with 16 per cent of claims closed after 12 months and 32 per cent after 18 months.

Three years on, there were still many outstanding claims.

"The scale of the event [in New Zealand] was larger than the country's loss-adjusting, engineering and insurance industries were equipped to deal with, delaying the settlement of a significant percentage of claims."

The report said New Zealand was "the least prepared of all from an insurance perspective".

"Christchurch had not been regarded as a high-risk earthquake zone, and, as a consequence, people were underprepared for the February 2011 earthquake."

Japan was often associated with earthquake risk, but even with its experience, the nation had not been prepared fully for the impacts of earthquake, tsunami and radioactive contamination.

However, 90 per cent of the claims were reported within the first six weeks, the report showed.

Chile achieved the quickest claim settlement rate, but the country did not experience the same degree of urban impact and restriction zones as New Zealand or Japan, the report said.

Most claims were also reported within one week of the 2010 Chilean earthquake.

In New Zealand, it took four months for 80 per cent of claims to be reported.

The reports put New Zealand's slow progress down to the closure of the central business district after the quakes, ongoing aftershocks and practical difficulties in assessing the scope and nature of damage.

Insurance Council of New Zealand chief executive Tim Grafton said comparing the Canterbury earthquakes with what happened in Chile and Japan was unfair.

"It's a totally misleading comparison to make.

"The circumstances in Chile, Japan and New Zealand are vastly different both in terms of the geophysical events that took place, and in terms of the types of mechanisms that were in place to provide insurance cover.

"We have now settled about 75 per cent of commercial claims at a value close to $7b.

"So, progress has been good given our time frames began later than in Japan and Chile."

Canterbury Employers' Chamber of Commerce chief executive Peter Townsend said delays in insurance settlements had been a major problem for local companies. "Right now, about 70 per cent of the commercial claims have been settled, and about 45 per cent of residential claims have been settled.

"That's three years down the track and it's taken far too long. We need to make sure that we tidy up the tail quickly because the recovery is driven by insurance."

As a broker, Marsh works with all insurance companies in New Zealand. For Christchurch's contracts, it worked mainly with NZI, QBE, Vero and Lumley.